Financial reporting - Klára

Question 1

What is the main directive in regards to accounting?

Answer 1

AD ()

Question 2

What is the object of the AD

Answer 2

To protect the interests of

Question 3

How does the AD reach its objectives

Answer 3

With minimal harmonization of national laws

Question 4

What is minimal harmonization?

Answer 4

Maximum - dimdip UK judgement

Minimum - MS can set stricter requirements

Question 5

How has the AD been implomented in iceland?

Answer 5

Lög um ársreikninga

Question 6

What is the scope of the AD

Answer 6

Limited liability companies
- companies can be subject to lesser or more requirements dependent on if they are small, large or public interest

Question 7

What are public interest entities according to the AD

Answer 7

Listed companies
CI
Insurance undertaking
Other companies designated by MS
-in iceland pension funds e.g.

Question 8

Are public interest companies subject to additional discloser requirement’s?

Answer 8

yes

Question 9

What is the minimum standards for a annual financial statement?

Answer 9

BS
P&L
Notes to the statement
-MS can add additional documents

Question 10

What is the requirement that an annual report must give a true and fair view?

Answer 10

an annual report should give a true and fair view of an undertakings assetes, liabilities, financial position and profit or loss.

That is to give the reader information that is true and fair - food for thought: Banks are very complicated

Question 11

If a company follows the AD but ends up not giving a true and fair view - what should it do?

Answer 11

If a financial statement is not giving a true and fair view and still follows the AD the undertaking should depart from such provisions in order to give a true and fair view (regulatory override) Disclose in the notes

Question 12

Where are the layouts of statements discussed in the AD

Answer 12

annexes III-IV

Question 13

What kind of layouts can companies use for BS?

Answer 13

Horizontal or vertical

Question 14

What kind of layouts can companies use for P/L?

Answer 14

bay nature or by function of expense

Question 15

Can a company change its lay out?

Answer 15

No, they have to choose the layout and stick to it. They can change it in exceptional cases to fulfill the requerment of true and fair view but must disclose in the notes

Question 16

What er the general financial reporting principles in the AD? - ATH setja líka öfugar spurningar og útskýra hvað þetta stuff þýðir

Answer 16

company shall be presumed to be carrying on its buisness as a going concern

accounting policies and measurement bases shall be applied consistently from one financial year to the next

Recognition and measurements shall be on a prudent basis

The opening BS for each financial year shall correspond to the closing BS for the preceding financial year

The components of asset and liability items shall be valued separately

Items recognized in financial statements shall be measured in accordance with the principle of purchase price or production cost

Question 17

Items recognized in financial statements shall be measured in accordance with the principle of purchase price or production cost - this is a principle in art 6. Can you explain.

Question 18

What are notes to a financial statements?

Answer 18

Notes should provide supplementary information to the financial statements

e.g.
Derogation from the general rules of the directive
Accounting policies

Additional requirements for medium and large undertakings and public-interest entities

Question 19

What is the management report?

Answer 19

report by the management of the company that includes e.g.:

review of the development and performance of the business

The undertaking position

Description of the principal risks and uncertainties

KPI’s relevant to the particular business

and some other indication of, e.g., R&D, future developments, existence of branches.

Public interest entities have also additional information disclosure requirements such as:

corporate governance statement

Question 20

If a bank is a parent undertaking what requirements must they fulfill in regards to financial reporting?

Answer 20

They must create a consolidated financial statement and management report for the conglomerate??

Question 21

What is a parent undertaking?

Answer 21

Parent undertaking:

Has the majority of voting rights in another company or,

Has the right to appoint/remove the majority of the management or,

has the right to exorcise dominant influence on the basis of a contract

Question 22

Once a bank has finished the financial report what is the next step?

Answer 22

It has to be audited by person/firm approved in a MS

Question 23

What must the auditor do?

Answer 23

Express his opinion on whether the management report is consistent with the financial statement, is prepared in accordance with the relevant legal requirements and if it contains material misstatements

Question 24

Is there also a special directive for companies providing financial services?

Answer 24

Yes, dir on the annual accounts and consolidated accounts of banks and financial institutions - refers to many provisions of the AD

Question 25

What is the difference between lay out of P/L

Answer 25

one is by nature and other by function

Question 26

Klára stuff um international accounting standards